The Distillation of Yen Liow

Yen Liow is the Managing Partner at Aravt Global LLC and a voracious learner, but most importantly Yen has been a guiding force in my life. There are few people in this world who have had such a tidal wave of positive impact on my life like Yen Liow and I wanted to share some of the incredible wisdom he has taught me.

To be a great investor starts with a great mind or IQ with great taste. Second is a great temperament or an emotional quotient. Lastly, a huge work ethic.

To be a skillful investor, there is a lifetime of skills you need to acquire. You have to learn in dog years in order to compete at a high level early in your career. If you do not train and refine your learning style, you can’t see great investments if they were literally in front of your face.

You, inc.

You have to think of yourself as the CEO of You, inc
You have to be able to invest in that core intellectual property, you have to own it. And everything you do must control how fast and how effective you control that IP. There is no shortcut and you have to own it.
To play this game, you have to become a highly functional, committed learning machine.
Ea. It’s a Polynesian word for personal sovereignty. The point is, you must own your journey. You are accountable for the entire ride.

Life is Finite

You may feel like this is going on forever, but this is very finite. You don’t have a lot of time to waste so get on with it quickly.
The quote “I wish I’d known that I was one day closer to death everyday and I would have lived differently.” by Michael Landon led Yen to start reading about end of life perspectives.

“I’m just trying to live the best version of me, but it’s finite and you have to enjoy those chapters that Peter described. Because each chapter of your life is very finite, and you should try to enjoy as much as you can of each part of it and do your best, but the fire’s in me”

You need an internal fire in you. Yen’s is his pursuit of being the “best version of me”
Great appreciation for the sacrifice, luck and responsibility that comes on this journey
The internal game is just as important as the external game of how you evolve and meet the world. The fuel source has to change.
1. Yen’s fuel source went from just trying to survive early on to now he’s trying to “find my edges”. Yen had to set out to learn the “how”.

Pain, Discomfort & Struggle

Everything that you seek or want from your life, is just outside of your comfort zone. Otherwise, you are likely to already have it
Struggle will be your companion for your entire life, if your journey is based on excellence. The easy decisions will always be passed to others.
The difference between struggle and suffering is context. Specifically, struggling with meaning, it’s just pain with meaning. Suffering is pain without meaning.

“Being able to understand the context of your pain is extremely important. It can become motivating or destroying. Struggling is actually the neurological precursor to insight. If you are struggling, it means you are learning and you are growing. Don’t fight it. You have to learn to embrace it. The aha moment is literally your brain struggling to a point where it’s preparing itself to rewire with insight.”

To excel, challenges will increase. So the quote here is from Billie Jean King, “Pressure is a privilege and it only comes to those who earn it”

“As you ascend into higher levels of responsibility, the easy decisions should be handed to others. And henceforth, the struggle will only increase, as you become more privileged in the decisions you are empowered to make. It becomes a lot more fun when you understand that struggle is your journey, your partner in this journey, and you don’t want to be fighting it.”

Find Your Why

If you find your WHY, you will always find your HOW.
Ubuntu, is your reason for being. The bigger the WHY, the more powerful the HOW. If there is no consequence to your WHY, you will not have good solutions.
If your WHY is extraordinarily large, you will be more creative than any problem can overwhelm.

Decisions of Consequence

Yen’s internal journey was compounded by the fact that he was an immigrant and this led to what he calls “decisions of consequence”

“I call these decisions of consequence, when you have no one really backing you up as a family, you have to scrap and you have to fight. And you have to fight to survive. So you have to be financially independent, which is the first step of this. As a parent, and I have two children, I love them very much. It’s like, my dream is to help them find their dreams and live their dreams, not live my dreams, that’s a great fortune that any parent should have the privilege of doing.”

Game Selection

The most important question I implore you to ask is: What game will you choose?

Where should you spend your time? Spend real time and resources working out this question. Most people follow a path because it creates momentum and it’s too difficult for them to change path. The point is, try to pick unfair fights, games that are valuable and that you can win.
Before you start pouring your entire life force in terms of mastering an art, actually have the ability to sample enough in your career to know that’s what you want to spend your life in.

“In order for Game Selection to work you need to understand how it meshes with who you are? You need a deep understanding of your authentic self and match that with a game of where you can have high performance.”

How Yen Started Investing

“I’ve been investing in stocks since I was about 14. I was just curious about the investment world and how it worked. And this again is where I think decisions of consequence. If you want to learn fast, you have to be accountable for your decisions, and as soon as possible there needs to be feedback loops to it. And so how I stumbled on investing, I stumbled on it very early. You can’t save your way to a fortune, you have to save to invest in a fortune, right? You have to live a frugal, a life or one within your means in order to save, but you can’t save it to a substantial life-changing level of wealth. So I started fixating on understanding patterns of value creation, and I think this is a very important part of the evolution into my 20s and 30s. If anybody wants to be significant in the amount of wealth creation in their lifetime where or wanna create anything, the number one most simple part of it is value creation and then character, the two have to go in together. It’s capability and character combined”

Compound Math

Compound math is by far the most important force in the universe. And you have to get on the right side of it as early as you possibly can. And this applies to literally everything in your life, whether it’s capital, ability, insights, contacts.

Controlled & Uncontrolled Learning Leaps

Learning leaps are step function increases in ability

Uncontrolled Leaps
- The uncontrolled leaps, is where you have aha moments. Your brain has a piece of insight that solves complex problems that you are literally rewiring your brain. You are different once you’ve solved that equation or you have that insight than you were before.
Controlled Leaps
- Where you create environments that create that leap in capability. You must compress your learning and increase the number of controlled leaps.
- The more time and money you invest in these step function growth opportunities is what will determine your outcomes and quality of life.

Plateaus

Masters live in the learning plateaus.
Mastery and the whole pursuit of mastery is the journey. There is no end point. The point is that masters don’t get bored. They recognize the plateaus are part of the journey.
Most people drop off during the plateaus of learning because it’s where you hit a mental block.

“And so what I’ve discovered is the masters love the grind of training, they absolutely love the training and they fully embrace that they’re not going to be 5-10% better every day. Even one, two, three basis points each day is better, or if it drills in muscle memory, even better.”

The book Mastery by George Leonard provides more detail on this

Deconstruction

Start with knowing your goal and then breaking down the skill, and then training it very rigorously.

Tiger woods reverse engineers every single hole. He starts from the green back to the tee. Tiger deconstructs probabilities in the game of golf.

“The point here is, every master I have ever studied, there is a game within the game and they deconstruct the core elements of the game, to give them advantage, and then they mold the game to their strengths.”

Deliberate Practice

It starts with a mental model of perfect execution. If you don’t know what to practice, you can’t become great at it. No amount of effort will solve this.

You need to know what really good looks and feels like.
Break down the components into its technical components, and if you can do it very, very slowly, then you really understand it.
Don’t allow speed to hide poor technique.

“You need to practice a lot. This means pushing it to the absolute edge of your abilities. It’s hard, but it’s really fun. Deep practice is built on this paradox of struggle. You need to embrace that, struggling in a certain targeted way, is operating at the edge of your ability. It makes you smarter. All growth comes at the point of resistance. This is both physical and mental. If it’s not hard, you already know how to do it. Henceforth, you will not become stronger, you will not become wiser.”

Mistakes

Mistakes are another partner on this journey to excellence.

All the greats have stumbled and you can’t get there without making lots of mistakes.

“The way you should segment your career path is early on. If you’re not making lots of mistakes while you’re being watched over and risk being managed by others, you’re not doing your job because you haven’t made the mistakes to learn from, by the time you’ve become a senior leader. You’re too fragile and you’re too early on this, so Munger, who’s about to speak this afternoon will tell you it’s like if you really want to sharpen your cognition, you need to learn from your mistakes.”

“All of mastery comes from depth. Excellence always comes on the basis of strength.”

Study Success and Failure

This is comparative learning,Yen calls this type two learning. It’s very difficult to see change or the strength of something when you compare it to itself. It’s really powerful when you contrast it to something else.

Studying failure has allowed Aravt to identify points of failure earlier. Aravt highlights in their notes with different colors everything that is disconfirming so they can scan their notes very quickly for what’s disconfirming.

“There’s a very big danger when you only study success because it blinds you to all the counterfactual and seeking dis-confirming evidence is actually one of the most important parts of what we do”

Learning From Pain

In the long run, your most painful losses proved to be far more valuable than your wins. Our greatest insights by far have come from mistakes, not victories.

Josh Waitzkin’s book, The Art of Learning, says that in the long run, your most painful losses proved to be far more valuable than your wins. Our greatest insights by far have come from mistakes, not victories. There is one wrinkle in here which is emotional versus intellectual learning. And I call that the Gandalf moment, which if mistakes for you only appear at an intellectual layer, you won’t actually learn them. It needs to go one layer deeper. Your emotions are far, far more important.

Leadership

Leadership starts with leading yourself. What it comes down to is, do you know what’s important? And do you know what moves the ball forward on what’s important? And if you don’t, keep asking questions for people that do. That’s where having mentors really helps.

Upgrade Your Operating Software

Learning is hyper-personalized and so in upgrading your OS, the first part of this is learning how you learn.
Know yourself, work yourself out. This is effectively the user’s guide to you. How people teach doesn’t mean how you need to learn.
Roger Federer doesn’t hit a forehand any differently than anyone else. He hits it perfectly and I think that’s the difference. You have a few select skills that absolutely matter.
Each of us all have three learning modalities. Neuro linguistic programming is the broad concept here. The three learning modalities are visual, auditory, and kinesthetic. Know which works best for you.
- Visual- Over 85% of people are visual and the brain actually works in pictures, not in linear words.

“I like to condense information into pictorial form. As I type, I need to get very active and translate what I’m hearing, what I’m seeing, what I’m thinking into word form and pictures and then I need to talk it through with my team. That’s the way I process and output and actually own the parts that have come to me. It needs to be very active and not at all passive.”

Signal to Noise

Find the highest quality resources that distill down the keys.
Must be very careful on the signals that you use to train your feedback loops.
You want to learn in clusters. You don’t want to learn individual signals. Individual signals are prone to tremendous amounts of noise. You want to look for clusters of patterns in the way that you’re evolving your insights.

Feedback Loops

You can’t refine your skills without a feedback loop, and it’s not about hitting a thousand balls each day. It’s about going out there and hitting a hundred absolutely perfectly, and there needs to be an evaluative process that lets you do this. So this is not about speed. This is about purposefulness which is the fastest path to mastery.
Feedback loops require an action and an output. The more reps you can put into that, the better.

“It’s anything that can add reps, that will accelerate your learning curve. And also the other parts of this is there are ways to break down the game within the game. It shouldn’t be all into one mega decision. There should be sub-parts of the decisions or your actions where you can tune to work out of it. So I’ll give you again a small example of this, on primary research, you can tune how you engage with primary sources and do three different formats of emails or voice scripts and see what the take rate is. That’s a feedback loop.”

Frameworks and Patterns

The more you explore your learning, thinking and decision making the more apparent these patterns and frameworks become.

“The last part is we like to learn within frameworks, not all decisions and not all styles of investing are the same. And the last part is to break it down into constituent parts. So you’re looking for consistent patterns within elements of your investment process, elements of your thinking, it’s not just one decision.”

Control of Your Schedule and Habits

Early in your career, you should say yes to most things, late in your career you should say no to most things. I think one of the most powerful habits of great investors and great leaders in general is offensive control of their schedules. You have to be in control. If you aren’t in control, you’re always reacting. Frankly, other people are dictating to you what’s important. So you’ve got to be an offense.

Find habits that work for many other people and pull parts of it and make them your own. You have to formulate and steal or borrow things that you’d like from others that you can use for yourself.

“For me, the optimal zone is mornings. So from 8:00 AM till 1:00 PM or 2:00 PM in the afternoon is absolutely the highest flow zone. I have to protect that at all costs.”

Questions

It starts with the power of questions. All problem solving comes down to the quality of your question and I would argue we can gauge intelligence far more from the quality of the question than the quality of the answer.

It comes with the quality of the question and the structure of the problem. The better the question, the stronger the answer.
The litmus test for this is, is there a so what? If there is no so what, move on and what we mean by that is even if you had the answer in any direction, does it change the outcome? But the power of questions is absolutely essential.
You should study philosophy in some form for the art of asking awesome questions.

Pareto Principle 80/20

80% of the effect comes from 20% of the action. And the irony in mastery is once you’ve got that 80% focus on the remaining 20 and that takes it all the way. To even work out what that 20% of effort is to get to the 80 requires deep thought right up front in your process.

“We are dealing with a probabilistic future business. We deal with a constantly dynamic world. We have to focus on the important and the knowable. What is not knowable and not important, irrelevant. What is not important and knowable? It’s just busy work. And then the really hard part of this, is really important and not knowable and that requires inference and deduction.”

Using Your Subconscious Mind

To handle incredibly complex problems and learn deeply you need your entire mind and that means your subconscious mind. Your conscious mind is a very small part of the power of your brain.

Meditation, the power of white space. The way that the brain distills down is it needs to quiet and it needs to connect dots, and if your conscious mind is trying to do all the work, the subconscious can’t. The subconscious works when you quiet your mind. Meditation is really important.
There is a pattern to the aha moment. It’s why you have these breakthrough moments on holiday or in the shower.
Exercise is not optional. In order to be a peak performer, your body needs to be fueled in an incredible way. The journey for excellence is exhausting. You need a huge amount of exercise because you need a big tank. It also obviously makes you more resilient to stress, but it also creates white space that lets your mind and your body absorb all this crazy information that you filled it with.
Put questions into your mind before going to bed. As soon as you get up, start powering away at writing it. Some people have to hand write it, some people like to type it, just get all of this genius on to paper, don’t even question it, and then get on with your day.

“The way we do this is how do you find certain zones in your day where your conscious mind is not fully fired up yet and you can use the power of your unconscious mind. The way that I’ve found it most powerful is you need to focus overnight on one to maximum three questions. Commit them into a journal, literally write them down for that last half hour before you go to bed. When you get up, before you check your email, before you flood yourself with all of the useless stuff that comes in, in the morning, journal like crazy on what the answers to those questions are, don’t question it. Just go, go for half an hour, go for as long as you can. It doesn’t even matter, get in the practice of this, try it for five days. I can tell you the stuff that comes in there, if you don’t question it and you flow it and you keep letting it through, you will see deep patterns of problem solving that are truly extraordinary and when you’re under more stress, it’s even more powerful.”

Understand Your Why.

If you understand your why, you find your how.

You have to have the strength and you have to invest in knowing yourself.
The same job, the same role for two different people is misery or bliss. So deeply investing in going introspective is really, really important.

“I think, knowing yourself is probably the first and most important part of investing or any career.”

Introspection and Self-Reflection

It requires a team, it requires tremendous introspection and requires vulnerability to expose yourself to truth, and then enough truth tellers to actually tell you what they’re seeing and your ability to accept, and then adapt from it.

Self-reflection requires a data set and Yen journals and writes down each time they’re making a decision.
You have to put the ego aside. You have to accept whatever the data is about to tell you.It’s going to be very painful but the more you can put the ego aside the more you’ll be able to absorb the truth.
You need people around, “truth tellers” who you trust and can tease out your ideas and ask the hard questions to you.
Patterns, looks for persistent patterns of excellence… Don’t look for one offs

Practice and Skill Refinement

You have to reorient your resources, which is time, energy and financial resources.

What resources do you need to accomplish these goals? If you’re an intellectual property asset, you need to be investing real time and real money and real effort as early as you possibly can in your career. The exponential growth chart tells you for anybody even vaguely mathematical the more you are upfront in your efforts the faster that curve goes up. So you need to spend real time and real money on this.
What is the plan for developing yourself? Can you articulate your immediate and intermediate and long term goals?

“I had the great fortune of spending some time with Eddie Lampert in 2005 and 2006 at two retreats at Ziff Brothers Investments and I asked Eddie, how did you manage to be such an accomplished investor? He compounded at 30% for 20 years and he did it early in his career and he said to me, he spent 50% of his time training five zero for 10 years studying the best investments in history. We spent the next 10 years after that doing the exact same thing for about 20-25% of our time. Are you being passive or active in acquiring these skills? Nothing worthy of life comes easily.”

Case Study Methodology

Aravt uses a method called case study methodology Yen learned from Eddie Lampert.

In 2005 he asked Eddie Lampert how he was so insightful throughout his career. Eddie said he spent two decades spending 50% of his time training. He would study the best investments in history and this method was case study methodology.

“We’ve literally done thousands and thousands of hours on this, generated hundreds of cases internally. What that is, is literally taking clusters of the best investments in history and trying to learn patterns from them. And it’s very, very detailed work, it takes a lot of work per case, in fact, it’s best done as clusters because you’re trying to look for patterns. You’re not trying to look for just idiosyncratic outcomes, and what we end up doing is it… All of excellence, in my view, comes back to decoding and then decoupling, breaking down each element of it.”

Energy x Technique x Focus

This is one of the meta-frames of life that is essential to experience self improvement.

“All of mastery requires philosophy and deconstruction. And so decoding is a very, very important part of what I do because I’m trying to work out persistent patterns of excellence, but one of the most important parts of it in game selection is where do you focus all that energy, right? People can spend hundreds and hundreds of thousands of hours plowing away at stuff and they haven’t asked the first order question, where do you focus it?”

First you have to break down the whole process and then isolate the process you want to improve on. It’s a game inside of a game.
Then breakdown the key elements of that process.
Then you must spend months isolating on key elements

“If you make people 1% better on each of these dimensions collectively, it becomes an incredibly potent lift. And that’s another thing, don’t always just look for the big lift, even the one percent is enough for me. Making it a tiny bit better, tiny bit better and this evolves and something very, very potent”

You only have one life, live an epic one

Living an epic life requires an epic version of you and that requires a huge tank. It’s why Yen thinks of our business as corporate athletes. Having a huge tank, physically, mentally, spiritually, all three components are required to this.

“Because we are required to make decisions under stress constantly, and you can’t do that if you’re poorly fueled and you’re unfit and you’re tired.”

Physical: Yen went to the Human Performance Institute in Orlando and learned from Jim Loehr
- They train focused on stress and recovery. Energetic signatures in almost everybody is a wave not a constant and if you work in constant you break. So Yen works in bursts and his physical training is done in High Intensity Interval Training
Fuel: You have to know how to fuel your body and understand each person is chemically different so study what works for you.
Mental: Respect your psychology. There’s another gear in each one of us. Understand that mindset requires work and you must seek our people wiser than you.
Spiritual: Philosophy is the love of wisdom and pursuing it, and for me, the spiritual journey is an unleashing factor.
- The Surrender Experiment and The Untethered Soul by Michael Singer
- John Wooden “Wooden unleashed me spiritually and mentally”

“To live a great life, you have to define a perfect day, and you have to play offense with your day and you have to design your surroundings and your day in order to optimize it. Otherwise, you’re always playing defense.”

Training for a hyper-competitive world

Investing is the most extreme version of competitive learning and there’s an enormous amount at stake in high stress environments. Yen views training as an investment in the long term.

Training for investing is a lot like training for a professional sport.

“I can’t think of any professional sport where the training to the playing ratio isn’t dramatically towards the training, right. Investing, people could say that they’re training on the job, there’s some truth to that, but it’s the equivalent of going out there and playing golf every day and not refining any sub-element of the skill or just thinking every down just making you better. Any athlete knows that’s not the way you do it, right. It requires dis-aggregation and deepening and really focused effort. So I call them controlled and uncontrolled leaps and an uncontrolled leap is a step up in the capability of a particular skill set or an insight, and uncontrolled one. An uncontrolled one is the a-ha moment… A controlled one is done through intense training, focused training.”

The essence of insight is having these a-ha moments and rewiring the brain where you now see the world differently.

“Insight is finding patterns where you can take abstract fact patterns and you can see how they actually operate and find causality and how things, in order to that chaos, and that’s what we’re trying to do is desegregate all of this chaos and find ways to operationalize this. From an external perspective, it’s really decoding, simplifying, executing and refining all four steps constantly. Decoding, simplifying, executing and refine.”

Yen’s looking for abstract fact patterns that he can find casualty and bring order to chaos and find ways to operationalize it. It’s all about “Decoding, simplifying, executing and refining”

Yen’s Typical Day

Yen is most creative in the morning and protects that time
Does Transcendental Meditation for 20 minutes as soon as he gets up and then journals for 20 minutes
He operates in concentration cycles of 20 to 25 minutes and uses a timer on his watch that let’s him monitor his stress/recovery cycles throughout the day
- When he knows a cycle is only 25 minutes as opposed to an hour he can go full tilt and then take a break. Long concentration cycles are too long and if you break them up into multiple 30 minute cycles you get more out of them.

Journaling

What Yen’s wrestling with he writes it down, goes to sleep and then the next morning whatever comes out let it flow onto paper. By addressing two key questions at night his subconscious doesn’t go idle and it sparks a creativity inside of him. It’s similar to having a great idea in the shower.

“It’s white space, and this is one of those elements that is profoundly misunderstood. It is actually recreation, relaxation, and creative endeavors that are really important parts of the problem solving process. It gives you a chance of distillation and creativity.”

The grind of training is what defines you. Excellence is doing the same thing everyday until it’s second nature.

“I believe the brain is a very sophisticated problem-solving device, but it’s only as good as the questions you ask it”

Flow State

Also known as being in the zone. It’s the mental state in which a person performing some activity is fully immersed in a feeling of energized focus, full involvement, and enjoyment in the process of the activity.

The sweet spot where optimal learning takes off.
The question is can you recreate it regularly (at will), this is what lets you tap into your creative genius. There is a pattern and again it’s within your control.
It only lasts three hours a day max. Your brain doesn’t have enough brain sugar to do any more than this. The fortunate part is it’s all you need.
Needs to stress your capabilities. To perform at the highest levels in anything you do requires an element of stress, but the question is how much of it and can you balance it? If it’s too little and you’re well within your zone, nothing happens. You’re performing below your capability. If it’s well beyond it, you can’t handle it and eventually you’ll break. It’s finding that balance and that toggle and again, you and your organization needs to learn how to control it.
Flow state sits just outside of your existing capability. That’s why certain types of puzzles and games are so enthralling. Video game programmers are masterful at layering this because it’s incredibly fun when it’s just a little bit too hard, but if it’s too easy, it’s boring and if it’s way too hard, you get super anxious. There is a fine line in there and that is the flow state and my God, does Dopamine flow when that happens.

Decision Making

If you want to understand how people think and act, you need to understand their mental model of the world. Absolutely critical.

Frameworks are a critical part or refining great judgment on literally anything. Good judgment is a function of mental models or frameworks. It’s iterative within a finite set of variables. You iterate towards refined judgment, but you need to develop and refine these frameworks constantly.
80% of decisions are generic, so use your energy resources on the most important stuff.
Your brain is a finite amount of resources. Frameworks remove the things that are decisions that are effectively already made and as leaders you shouldn’t be making those decisions. It saves a tremendous amount of time and energy that lets you use that energy on critical factors.
If you want to become something special quickly in your life, you need to put yourself in a position to be accountable for your decisions as early as possible. To learn rapidly, you have to own your outcomes. Everybody I’ve ever studied that’s been incredibly successful in their life, this is absolutely true. You will eventually become the product of your decisions.

Mental Models

Use it to see opportunity and act with more conviction quickly. This is how rapid acceleration of knowledge takes place. We do it for styles of investing. We do it for decision making. We do it for the research process. We do it for hiring, we do it from meeting structures. The whole point of it is excellence requires constant refinement of a process that can be scaled and judgment is a process. The variables constantly change, but you need to probabilistically be able to develop the mental models in order to make and refine great judgment.
Look for disconfirming evidence. Write up your thinking and don’t look for things to confirm your thinking, look for things to disconfirm.

Upgrading Your Operating Software

Speed Reading- A speed reading course takes eight hours to upgrade your life forever. If you read between three, four or five times faster than your peers, this is a game of information, advantage, and knowledge.

Upgrading your memory comes in two forms.

The first is, to connect dots you need to create dots, and that is mind maps- Your mind isn’t linear, it’s contextual and it loves pictures. The mind learns by connecting pictures. It doesn’t deal well with the abstract. So go onto Google, it’ll take you 20 minutes to understand mind maps.

Contrast and Comparative Learning and to teach you a little bit about the physics of how your eyes actually work.
Deconstruction- To break down a complex problem, to solve a complex problem, requires you to break it. You need to break it down and then reassemble it. Dummy down a complex problem into simple blocks
Associative learning- Abstract learning is incredibly difficult. What that means is the first time you learn a language, your brain has no framework to base that learning from.We learn a lot faster when it’s linked to prior experiences or knowledge. This is the lattice work of your brain. We learn in links and analogies

The human body is designed, if you have patterns of recognition or patterns that get constantly used, it goes super fast. If it needs to be wired for the first time, it’s super slow.

“To take some sporting analogies, it’s a lot easier to learn golf when you know how to play tennis, than it is when you do it for the first time. There’s elements to balance, coordination, and stroke motion. If you learn a language for the first time, it’s extraordinarily painful because to the brain, it’s completely abstract. The second time it’s easier. Third, it’s better. The fourth time’s incredibly fast because there is a structure to the way that you break down the problem.”

The skill/mindset that Yen finds hardest to transfer to other people

Self awareness is the hardest to transfer and its very difficult to increase someone’s self awareness
Patience.

“Now, I’m not a naturally patient person, let’s be honest. It doesn’t mean that we’re not aggressive in a way that we reach and pursue excellence, in fact, we’re very aggressive. It’s just we know how to separate out risk and actions like hyperactivity and research is very different from hyperactivity and training.”

Mastery of your emotions is far more important than the technical skills

“You’ve got to know who you are, and investing is, in many ways, a spiritual game and I don’t mean that by hiding under your desk and praying to God when you have a crisis like what we’re facing. It’s a deep test of conviction under certain periods of time and it will find dark places in your analysis that no other way can do it. Stress reveals, and so you find an investment style that matches your skills, your talent, and your temperament.”

Don’t live one life, live three.

In your 20s: do a lot of stuff, go enjoy it, go try a lot of things, you can’t work out who you are, where you belong. You won’t fall in love by sitting idly. Don’t worry about failing, just try a lot of different things.
In your 30s: once you’ve found one thing, go deep and go fast.
In your 40s: you need the courage to take the bet and have the fortitude just to know you can work it out.

Mentors and Peers

This is a critical success factor in every successful person I’ve ever studied. Mentors will help you navigate the path. They’ll open your eyes, they’ll open doors, they’ll help you avoid landmines. Peers, they’ll elevate your standards and help you redefine the possible.

You have to earn the right to become a mentee.

“That means being a good person and paying it forward. It’s a very unusual relationship mentor, mentee. It’s the only relationship that isn’t truly bi-directional. We’re aligned in the same direction. What that means is a mentor wants a mentee just to pay it forward, amplify their good will into this world.”

Act on the advice given. There’s nothing harder for a mentor who is already short of time than to keep repeating themselves with a mentee. Then invest in long term relationships.

Lessons Learned from Peter Gunn

The first thing he taught me was “Life doesn’t give you anything. It owes you nothing. You have to go after it yourself and you have to earn it, and it takes a lot of hard work.”

At the end of each summer Peter would sit him down and ask him the following questions and then for a week would have Yen “draw it all out” which forced him to think. This gave Yen a clarity of vision he used to map out his next 25 years.

What did you learn?
What did you observe?
How would you do it better?

Labor vs Capitalism

“One of those lessons I will never forget was to understand capitalism versus labor. He said to me, “Listen, if you want to create a fortune, you’ll never do it by working on an hourly basis. So he said, go pick up that box. And I said, “What do you mean?” He said, “Just go pick up that box.” I picked up that box and he laughed at me and he goes, “Two cents to me,” and I said, “What do you mean?” And he goes, “Pick it up again,” and I go, I pick it up and he goes, “Two cents to me.” And I said I don’t understand. And he goes, “Well, how much money do you make if you stop working, if you’re out of labor, if something happens to you?” And I say, “Oh, I’ll make nothing,” and he says, “I understand that.” When you create systems and you work really, really hard, now you can create compounding effects on return on capital, and that’s the only way if you want to create a vast fortune or achieve something great, it needs to be beyond the individual effort. It needs to have compound elements to this, and it blew my mind. It completely blew my mind. And then part of this, Peter started forcing us to think.”

Lessons Learned from Genghis Khan that Yen Uses in Business

Genghis Khan was a Learning Machine up until the day he died. He learned from everything he encountered and experienced. He learned from his enemies and incorporated the most intelligent enemies into his empire. He was humble enough to know when he could apply lessons from others that were better than his.

Speed & Adaptability– Khan and his army traveled light so they were incredibly fast and had the ability to adapt. They incorporated all the cultures he absorbed when they conquered their enemies. He did not impose his culture on theirs but deeply respected their customs and religion.
Extreme Organization and Scalability. His warriors were organized into squads or Arban of ten. They became like brothers. None of them could ever leave the other behind in battle as a captive. (Not sure if this is where the US military got it from, but the Mongols treated this as a code they could not break).
- “He had a very sophisticated hierarchy. His army was decimalized into teams of 10, 100, 1000, 10k. There were protocols and processes for each segment. They worked on detailed communication through multiple means. They decentralized tactical decisions and centralized strategic plans. It was rare that they did not know how to adapt and move during a fast and furious battle compared to the confusion tactics they utilized against their enemies. They used the OODA Loop and acceleration principles (800 years before they were discovered/named) to strike purposefully when the enemy was confused or exhausted. His senior generals served with him for 25-40 years. They had a deep culture and process.”
Fight Unfair Fights. He never fought a battle; he didn’t think the odds were stacked in his favor. Khan hated to put his warriors at risk and they won many wards without a single fight (strategy learned from Sun Tzu). Every tactic his army deployed played to their advantage. They based their strategies on terrain, speed and endurance. Their tactics were cutting edge and always started with how to preserve Mongol life (risk first approach).
Innovation. “Through their travels they discovered technologies from all over the world. They discovered gunpowder and how to use it over time. They discovered catapults to give them range advantage. They used engineering tactics and terrain to their advantage. Ex. when they fought the knights of the Western Kingdoms they exhausted the horses and the knights by retreating, then slaughtered them. Their bows had greater distance; their catapults and explosives had greater force. He evolved everything he did and had a passion for putting to use everything he encountered. He was a nomad and knew how to utilize everything at his disposal. He even evolved the process of looting.”

“But it inspired me to try to decode a little bit of what Genghis Khan and Subotai actually did to achieve such greatness. And one of the key things that I wanna touch on here was to do extraordinary things, you can’t do normal things, you have to pick very clean strategies, and indeed, my firm is actually named after Genghis Khan and Subotai. We call it Aravt.”

Why Yen loves biographies

“The thing that we study, and you see it in every one of these is it’s not a straight line. They all have to deal with some very major setbacks, and there’s a lot of luck involved in life, and they’re highly persistent and grinding away at what they do. Deeply principled people who made decisions and consequences, they’re all the same. That’s the reason why I love biographies so much is that everybody sort of idolizes the outcome. What I find most interesting is how do they deal with the adversity, and every single one of them has dealt with tremendous adversity.”

“The Truth Will Set You Free, But First It Will Piss You Off”

Sean: It seems there’s so much, in truth and uncovering the truth. So I’d love you to discuss being true to yourself and the bigger concept of truth both in life and in business.

Yen: “Wow, this is a really wonderful topic, and it’s a hard one, and one of my bosses said to me,“The truth will set you free, but first it will piss you off.” And I firmly believe it. The truth will set true free, if you can face it, and it takes a lot of work in introspection to find what those truths are. And who you are is one of the eternal questions, but how do you find out is one the hardest questions you can ever ask.

There are no shortcuts to this! Insights aren’t very useful in changing lives if they’re not coupled with disciplined execution, and it’s the boring stuff that actually makes the difference. The insights are profound, people do change, but they don’t change profoundly until they execute them all the time.

Introspection has to become a core part of what you do, because it’s understanding how you operate and not questioning it, not necessarily judging it, or even respecting your own psychology of it.

Why are you reacting in a certain way? Now, the hard part of this is also you’re evolving. I’m not the same guy I was even yesterday, and so just teasing it apart and not trying to judge it, but just trying to find fact patterns. Why is it that you’re quiet here? Why is it that you’re strong here? Why is it you go to that person and not that person? Why is it that that team, that business, that industry, whatever, that you behave when certain stress cycles arise… Stress cycles are a wonderful way of discovering who you are, and mistakes are the greatest teachers of who you are, because the tells are where everything is revealed, and this is the way that we operate our business.

You observe everything about a person, a business under stress. You can observe nothing when things are going well. When they go through stress points, you understand how they make decisions, you understand how the organization works, you understand, can they make tough decisions or not.

There are so many things that get revealed by these truths. And so for me, in teasing a path to truths, there are lots of times when you’re going to be incredibly disappointed about what you find about yourself. And then you are faced with a decision of what are you going to do about it? Because that’s the key question. Life’s going ask really, really tough questions, and I think your life will be defined, I think my life will be defined, this is again, it’s just my humble view, by the way that I answer those questions, and there’ve been many that have been brutal, but quite candidly, it’s a lot more fun after the fact, but you don’t wish those on anyone but candidly, that’s the only way they discover who they are, what they’re made of.

And you have to live enough life, experience enough things in order to get enough data points to look for directionality, and then you have to decide. Is that who I still am, or who I want to become? Is that an area of weakness that I don’t want to strengthen? Is that an area of strength that I can make even stronger? And it requires a tremendous amount of introspection. Go full tilt and find out as much as you can, surrender and accept who you are and then evolve.

Who you were yesterday is not who you’re going to be in a year, and you just have to be all about… The only thing in our control is how we spend and marshal our resources and time, and that introspective process to the game within the game is once you understand who you are, by the way you will never actually be there, it is asymptotic, because it’s a moving target too. And that’s the beauty of it.

Why would you want it to be fixed? Continue to evolve, but it requires a team, it requires tremendous introspection and requires vulnerability to expose yourself to truths, and then enough truth tellers to actually tell you what they’re seeing and your ability to accept, and then adapt from it.”

Aravt’s better investments

There’s an ecosystem effect when you study and invest in quality, which I don’t believe you can get in other forms of investing.

3 ways to gain and edge

Strategy- Is game selection. Did you choose a good game that’s inefficient?
Skill- Are we skillful at executing on this? “Temperament, by the way, is a huge one. In our game, can you be patient and can you wait”
Structure – You must create a system because when systems are built a structure is built. When it’s built elegantly it allows for imperfect inputs to generate world class outcomes.

“And for me, it’s like it’s not enough to put a bunch of very smart people, throw them into the ring and go just generate alpha, just go do it. It’s too hard. This game is too hard for that to be true. You have to build systems that allow people to be built for human-scale, things are gonna happen, but your system is built so that it already tolerates that and can still generate very high through-put returns. And so that’s the thing that has allowed us to do it is all three elements coming together and we’re constantly tuning and constantly improving it.”

Four Edges in Business

Informational
Analytical
Behavioral
Instructional

Hiring Great People

Talent- This is table stakes
Character- People that are self aware, have a training mindset, they always want to improve, they’re open to feedback and they’re a team player.

3 things Yen solved for with his team

Can you operate well together? Can you make money together and in all businesses?
Does this person make us better, can we learn together?
Does this person give us energy?

“It’s those last three filters, and when you get them right, incredible things happen, and then when you go through stress cycles, you really see it. I’m very proud and very blessed to have a great team around me.”

“Finally, here’s my wish for you. You find your why, you work out your how. You choose a game wisely that you find fulfilling. Don’t just choose success, seek fulfillment. Learn to lead yourself and then others. Surround yourself with peers you admire and respect. Acquire mentors who show you the path or assist you, and then learn like crazy, work like crazy, and win like crazy. I hope you embrace and enjoy the struggle that is the journey of excellence.”

Books Mentioned

Genghis Khan and the Making of the Modern World by Jack Weatherford

The Art of Learning by Josh Waitzkin

The Surrender Experiment by Michael Singer

Wooden on Leadership by John Wooden

Destructive Emotions by Dalai Lama and Daniel Goleman

Emotional Intelligence by Daniel Goleman

Kochland by Charles Leonard

Titan by Ron Chernow

Invested by Charles Schwab

Shoe Dog by Phil Knight

Onward by Howard Schultz

What Got You There Podcast Interview

Watch Yen’s Interview on YouTube

What Got You There Podcast Transcript Video Link Yen Liow on Mastery: Learning How to Learn